Simms Advertising is an Internet advertising agency. The firm uses a job order costing system in which each client is a different job. Simms Advertising traces direct labor, software licensing costs, and travel costs directly to each job. The company allocates indirect costs to jobs based on a predetermined indirect cost allocation rate, computed as a percent- age of direct labor costs.

At the beginning of 2008, managing partner Stacy Simms prepared the following budget:

In January 2008, Simms Advertising served several clients. Records for two clients appear here:

Requirements 

1. Compute Simms Advertising's predetermined indirect cost allocation rate for 2008.

2. Compute the total cost of each job.

3. If Simms Advertising wants to earn profits equal to 30% of sales revenue, how much (what fee) should it charge each of these two clients?

4. Why does Simms Advertising assign costs to jobs?

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Direct labor hours (professional)............ 16,000 hours Direct labor costs (professional) ............... $1,600,000 Support staff salaries........... Rent and utilities........... 350,000 150,000 Supplies............. 15,000 Leased computer hardware. 285,000